Retirement might still be a few years away, but getting your finances in shape now can make a huge difference later. We caught up with Dan Evans, CFP®, one of MPPL Financial’s go-to experts on retirement planning, to discuss what pre-retirees should be thinking about, and doing, well before their last day on the job.
Here’s what Dan shared during our conversation:
Why is it important to prepare financially before retirement?
Entering retirement with financial confidence requires preparation—not just in terms of savings, but also in terms of cash flow planning. Ideally, this planning should begin several years before retirement.
At MPPL Financial, we help clients build an income funnel. This is a structured approach to retirement income—typically starting 3 to 4 years ahead of their intended retirement date. This proactive planning allows clients to retire with confidence, even if markets are volatile at the time.
Sometimes, clients choose to keep working longer than expected because they enjoy their careers. In these cases, we simply adjust the plan so they have the flexibility to retire when the timing feels personally right.
Clients often tell us that working because they want to, not because they have to, creates a meaningful sense of freedom. If they ever face major changes at work, like restructuring or a shift in company culture, they know they can walk away on their own terms.
What worries pre-retirees most about retirement—and how can they overcome it?
When it comes to what worries pre-retirees, one of the biggest mental hurdles is shifting from saving to spending. Many retirees feel anxious about drawing from their portfolio, fearing they might outlive their assets.
That’s where a well-crafted comprehensive financial plan makes all the difference. At MPPL, we’ve helped clients navigate this transition for over 45 years. A thoughtful financial plan gives people permission to spend confidently in retirement, knowing they’ve accounted for the future knowns and unknowns.
We often break retirement into three phases:
- Go-Go Years: Active, travel-heavy years early in retirement
- Slow-Go Years: A more moderate lifestyle
- No-Go Years: When health or mobility may limit activity
A comprehensive financial plan allows retirees to maximize enjoyment in the Go-Go years, without the worry of running out of money in the later stages. We never want to see clients miss opportunities early on, only to realize later they didn’t need to be so cautious.
A financial plan can also model meaningful goals like funding a grandchild’s education, giving to charity, or taking a multi-generational family trip.
We had one client who wanted to take their entire extended family on a cruise—kids, spouses, grandkids. It was a significant expense, and the client admitted it was more than they used to earn in a year. We modeled it in their plan, confirmed they could afford it, and they went. Later, they told us they never would’ve done it without that peace of mind.
Many clients also prefer to give while living, enjoying the impact of helping their children and grandchildren in real time, without compromising their long-term financial security.
Tell us more about the income funnel you referenced earlier, and why is it important?
For clients that are still working, MPPL Financial typically recommends maintaining a 3 to 6-month emergency reserve to cover unexpected expenses like car repairs or medical bills.
In retirement, however, we advise building a 3-4 year-cash reserve—what we call an income funnel. While working, market downturns are buying opportunities. But in retirement, selling stocks in a down market to cover living expenses can do lasting damage to a portfolio.
An income funnel provides stability. It allows retirees to ride out most market corrections without needing to sell assets at depressed prices.
What’s one critical financial step someone should take upon retiring?
I’ll give you two critical steps someone should take upon retiring:
- Create an inventory of your financial assets.
At MPPL Financial, we help clients organize and document all their accounts. This ensures they know where everything is—and it helps their heirs in case something happens to them. - Consolidate your financial assets.
A good place to start is rolling over a 401(k) into an IRA. While 401(k)s are great for accumulation, they often fall short as distribution vehicles. Many have limited investment options, charge fees for distributions, and lack flexibility.
In contrast, rollover IRAs offer:
- A wider range of investments (individual stocks, ETFs, bonds)
- More efficient cash flow management (e.g., direct deposits into a checking account)
- Lower internal fees compared to mutual funds
Plus, trades in IRAs can happen in real time. With mutual funds, you don’t get the sale price until the end of the day, which can be risky in volatile markets.
What other key financial steps should someone consider when preparing for retirement?
Tax planning is critical for someone to consider before retiring. While we don’t file tax returns at MPPL Financial, we collaborate closely with our clients’ CPAs on strategies like Roth conversions.
Since Roth IRAs weren’t introduced until 1997, many retirees didn’t have the chance to build up tax-free savings during their working years. As a result, much of their 401(k) balance may be pre-tax—meaning it’s fully taxable upon withdrawal.
Once required minimum distributions (RMDs) kick in, retirees may find themselves in higher tax brackets than expected—sometimes even higher than when they were working!
That’s where Roth conversions come in. This strategy allows you to shift assets from the pre-tax to the tax-free bucket by paying taxes now, so those assets can grow and be withdrawn tax-free later or passed on to heirs with no tax implications.
Given rising government deficits, higher tax rates in the future seem likely. That makes early retirement a strategic window for Roth conversions.
Estate planning is also crucial. Major life events—like retirement, a job change, birth of a grandchild, or loss of a spouse—are ideal times to review and update your estate plan.
How can a financial advisor help someone plan for and succeed in retirement?
A financial advisor can help someone plan for retirement in these ways:
- Help flip the switch from saving to spending with confidence
- Clarify your priorities and build a plan to achieve them with less stress
- Manage financial risk across market cycles
- Ensure your legacy goals, whether family support or charitable giving, are built into your overall plan
Ultimately, at MPPL Financial we help clients live the retirement they envision—with clarity, control, and peace of mind.
Dan, thank you for your insights on this important topic.